Rescuing savers is top demand facing Osborne

Among the strongest rumours ahead of Thursday’s announcement is that the Treasury is set to impose a cap on the amount that can be saved into individual savings account (Isas) over a lifetime.

The suggestion of a change that could disincentivise savings has sparked an angry response from savers groups, who have been lobbying for Osborne to increase the amount of cash that can be put aside tax-free.

Chancellor George Osborne will present the autumn statement a week after the Bank of England said the Funding for Lending Scheme (FLS) it would be scaled back from January and targeted at business loans rather than mortgages.

The news was a rare fillip for savers, who have seen the interest rates on cash accounts plummet since the scheme was launched in August 2012. By giving lenders access to cheaper finance the FLS reduced their dependence on cash deposits, with the predictable outcome that banks and building societies have slashed their savings rates.

The average cash Isa now pays just 1.6 per cent, down from 2 per cent a year ago and 2.39 per cent in August 2012, according to Moneyfacts.

Rachel Springall, of Moneyfacts, said: “Savers have been facing an ever-losing battle because of the FLS.

“The announcement from the Bank of England that the FLS will be refocused towards businesses and not household lending could be positive news for savers, as lenders may now want to attract more deposits to fund their mortgage books.”

But while the savings market should slowly improve over the coming months, campaigners say savers need more help. Top of their wish-list is a change of rules on Isas to allow savers to use all the annual allowance – currently £11,520 and rising to £11,880 in April – for cash. Currently only half the allowance can be held in cash savings, whereas the full amount can be used held in equities.

The government has also been urged to use the autumn statement to confirm that child trust funds (CTFs) can be transferred into junior Isas (Jisas). People with existing CTFs are currently barred from switching into Jisas, leaving them trapped in a closed market. A consultation on the switch was announced in the Budget earlier this year, with the outcome likely to be revealed next Thursday.

Others have proposed a sharp rise in the overall Isa allowance to at least £20,000, claiming that it would be a timely lift for both savers and business investment.

Evan Duffus, a financial planner at Acumen Financial Planning in Edinburgh, said: “Such a move would encourage individuals to save and invest more money in tax-efficient Isas, which banks and building societies could, in turn, lend to businesses to encourage greater economic growth.” .

Instead, however, the Treasury could be preparing to deal another blow to savers. It is believed to be considering a new restriction on Isas in the form of a new lifetime cap on the amount that held in an Isa. The cap limit being suggested in the Treasury is £100,000, although it has been warned by the industry that such a move would deter people from saving.

Anyone who has put the maximum allowance into Isas since they were launched would now have contributed £130,000, meaning they could face a tax hit if a cap is introduced and is retrospective.

But a retrospective cap would be a step too far and may even be illegal, Lord Lee of Trafford told The Scotsman.

“I don’t see how any democratic government could do something retrospective, but it could say that you can’t put in more than a certain figure,” said Lee, a former Conservative minister and author of a How to Make a Million – Slowly: My Guiding Principles from a Lifetime of Successful Investing.

“My view is that Isas have achieved a lot and that we should be encouraging people to save.”